Business Model Generation (Alex Osterwalder)

_definition of a business model
_9 building blocks
_the business model canvas
Canvas

_business model definition
A business model describes
the rationale of how an
organisation creates,
delivers, and captures value.

_9 building blocks
customer segments
An organisation
serves one or several
Customer Segments.
value proposition
It seeks to solve
customer problems
and satisfy customer
needs with value
propositions.
channels
Value propositions
are delivered to
customers through
communication,
distribution, and sales
Channels.
customer relationships
Customer relationships
are established and
maintained with each
Customer Segment.
revenue streams
Revenue streams result
from value propositions
successfully offered to
customers.
key resources
Key resources are the
assets required to
offer and deliver the
previously described
elements...
key activities
...by performing a
number of Key
Activities.
key partners
Some activities are
outsourced and some
resources are
acquired outside the
enterprise.
cost structure
The business model
elements result in
the cost structure.
1 2 3 4 5
6 7 8 9

Customer Segments1
The Customer Segments Building Block defines the different
groups of people or organisations an enterprise aims to
reach and serve
Customers comprise the heart of any business model. Without (profitable)
customers, no company can survive for long. In order to better satisfy
customers, a company may group them into distinct segments with common
needs, common behaviours, or other attributes. A business model may define
one or several large or small Customer Segments. An organisation must make
a conscious decision about which segments to serve and which segments to
ignore. Once this decision is made, a business model can be carefully
designed around a strong understanding of specific customer needs.
Customer groups represent separate segments if:
• Their needs require and justify a distinct offer
• They are reached through different Distribution
Channel
• They require different types of relationships
• They have substantially different profitabilities
• They are willing to pay for different aspects of
the offer

Value Propositions2
The Value Propositions Building Block describes the bundle
of products and services that create value for a specific
Customer Segment
The Value Proposition is the reason why customers turn to one company over
another. It solves a customer problem or satisfies a customer need. Each
Value Proposition consists of a selected bundle of products and/or services
that caters to the requirements of a specific Customer Segment. In this
sense, the Value Proposition is an aggregation, or bundle, of benefits that a
company offers customers.
Some Value Propositions may be innovative and represent a new or disruptive
offer. Others may be similar to existing market offers, but with added
features and attributes.

Channels3
The Channels Building Block describes how a company
communicates with and reaches its Customer Segments to
deliver a Value Proposition
Communication, distribution, and sales Channels comprise a company's
interface with customers. Channels are customer touch points that play an
important role in the customer experience. Channels serve several functions,
including:
• Raising awareness among customers about a company’s products and
services
• Helping customers evaluate a company’s Value Proposition
• Allowing customers to purchase specific products and services
• Delivering a Value Proposition to customers
• Providing post-purchase customer support

Customer Relationships4
The Customer Relationships Building Block describes the
types of relationships a company establishes with specific
Customer Segments
A company should clarify the type of relationship it wants to establish with
each Customer Segment. Relationships can range from personal to
automated. Customer relationships may be driven by the following
motivations:
• Customer acquisition
• Customer retention
• Boosting sales (upselling)
In the early days, for example, mobile network operator
Customer Relationships were driven by aggressive
acquisition strategies involving free mobile phones. When
the market became saturated, operators switched to
focusing on customer retention and increasing average
revenue per customer.
The Customer Relationships called for by a company’s
business model deeply influence the overall customer
experience.

Revenue Streams5
The Revenue Streams Building Block represents the cash a
company generates from each Customer Segment (costs
must be subtracted from revenues to create earnings)
If customers comprise the heart of a business model, Revenue Streams are its
arteries. A company must ask itself, For what value is each Customer
Segment truly willing to pay? Successfully answering that question allows the
firm to generate one or more Revenue Streams from each Customer Segment.
Each Revenue Stream may have different pricing mechanisms, such as fixed
list prices, bargaining, auctioning, market dependent, volume dependent, or
yield management.
A business model can involve two different types of
Revenue Streams:
• Transaction revenues resulting from one-time customer
payments
• Recurring revenues resulting from ongoing payments to
either deliver a Value Proposition to customers or provide
post-purchase customer support

Key Resources6
The Key Resources Building Block describes
the most important assets required to make a business
model work
Every business model requires Key Resources. These resources allow an
enterprise to create and offer a Value Proposition, reach markets, maintain
relationships with Customer Segments, and earn revenues. Different Key
Resources are needed depending on the type of business model. A microchip
manufacturer requires capital-intensive production facilities, whereas a
microchip designer focuses more on human resources.
Key resources can be physical, financial, intellectual, or human. Key
resources can be owned or leased by the company or acquired from key
partners.

Key Activities7
The Key Activities Building Block describes
the most important things a company must do
to make its business model work
Every business model calls for a number of Key Activities. These are the most
important actions a company must take to operate successfully. Like Key
Resources, they are required to create and offer a Value Proposition, reach
markets, maintain Customer Relationships, and earn revenues. And like Key
Resources, Key Activities differ depending on business model type. For
software maker Microsoft, Key Activities include software development.
For PC manufacturer Dell, Key Activities include supply chain management.
For consultancy McKinsey, Key Activities include problem solving.

Key Partners8
The Key Partnerships Building Block describes
the network of suppliers and partners that make the
business model work
Companies forge partnerships for many reasons, and partnerships are
becoming a cornerstone of many business models. Companies create alliances
to optimize their business models, reduce risk, or acquire resources.
We can distinguish between four different types of partnerships:
• Strategic alliances between non-competitors
• Coopetition: strategic partnerships between competitors
• Joint ventures to develop new businesses
• Buyer-supplier relationships to assure reliable supplies

Cost Structure9
The Cost Structure describes all costs incurred to operate a
business model
This building block describes the most important costs incurred while
operating under a particular business model. Creating and delivering value,
maintaining Customer Relationships, and generating revenue all incur costs.
Such costs can be calculated relatively easily after defining Key Resources,
Key Activities, and Key Partnerships. Some business models, though, are
more cost-driven than others. So-called “no frills” airlines, for instance,
have built business models entirely around low Cost Structures.

_the business model canvas
This tool resembles a painter’s canvas — pre-
formatted with the nine blocks — which will
allow us to paint pictures of new or existing
business models.
The Business Model Canvas works best when
printed out on a large surface so groups of
people can jointly start sketching and
discussing business model elements with Post-
it® notes or board markers.
It is a hands-on tool that fosters understanding,
discussion, creativity, and analysis.

Patterns_definition of patterns
_the 5 business model patterns

“Pattern in architecture
is the idea of capturing
architectural design ideas
as archetypal and reusable
descriptions.”
Christopher Alexander, Architect

_Pattern No. 1 unbundling business model
The concept of the “unbundled” corporation holds
that there are three fundamentally different types
of businesses: Customer Relationship businesses,
product innovation businesses, and infrastructure
businesses. Each type has different economic,
competitive, and cultural imperatives. The three
types may co-exist within a single corporation, but
ideally they are “unbundled” into separate entities
in order to avoid conflicts or undesirable trade-offs

_Pattern No. 1 unbundling business model > private banking

_Pattern No. 2 the long tail business model
THE LONG TAIL BUSINESS MODELS are about selling less of
more: They focus on offering a large number of
niche products, each of which sells relatively
infrequently. Aggregate sales of niche items can be
as lucrative as the traditional model whereby a
small number of bestsellers account for most
revenues. Long Tail business models require low
inventory costs and strong platforms to make niche
content readily available to interested buyers.

_Pattern No. 2 the long tail business model > examples

_Pattern No. 2 the long tail business model > Publishing Industry

_Pattern No. 2 the long tail business model >

_Pattern No. 3 multi-sided platform
MULTI-SIDED PLATFORMS bring together two or more
distinct but interdependent groups of customers.
Such platforms are of value to one group of
customers only if the other groups of customers are
also present. The platform creates value by
facilitating interactions between the different
groups. A multi-sided platform grows in value to the
extent that it attracts more users, a phenomenon
known as the network effect.

_Pattern No. 3 multi-sided platform > examples

_Pattern No. 3 multi-sided platform > Google

_Pattern No. 4 FREE as a business model
In the FREE business model at least one substantial
Customer Segment is able to continuously benefit
from a free-of-charge offer. Different patterns
make the free offer possible. Non-paying customers
are financed by another part of the business model
or by another Customer Segment.

_Pattern No. 4 FREE as a business model > examples

_Pattern No. 4 FREE as a business model >

_Pattern No. 5 open business model
OPEN BUSINESS MODEL can be used by companies to
create and capture value by systematically
collaborating with outside partners. This may
happen from the “outside-in” by exploiting
external ideas within the firm, or from the “inside-
out” by providing external parties with ideas or
assets lying idle within the firm.

_Pattern No. 5 open business model

_Pattern No. 5 open business model >

_patterns overview
UNBUNDLING BUSINESS MODEL THE LONG TAIL
CONTEXT
(before)
An integrated model combines infrastructure management,
product innovation, and Customer Relationships under one
roof.
The Value Proposition targets only the most profitable clients.
CHALLENGE Costs are too high. 
Several conflicting organizational cultures are combined in a
single entity, resulting in undesirable trade-offs.
Targeting less profitable segments with specific Value
Propositions is too costly.
SOLUTION
(after)
The business is unbundled into three separate but
complementary models dealing with: Infrastructure
management; Product innovation; Customer relationships
The new or additional Value Proposition targets a large
number of historically less profitable, niche Customer
Segments—which in aggregate are profitable.
RATIONALE
IT and management tool improvements allow separating and
coordinating different business models at lower cost, thus
eliminating undesirable trade-offs.
IT and operations management improvements allow delivering
tailored Value Propositions to a very large number of new
customers at low cost.
EXAMPLES
Private Banking
Mobile Telco
Publishing Industry (lulu.com)
LEGO

_patterns overview
MULTI-SIDED PLATFORM FREE AS A BUSINESS MOLDE
CONTEXT
(before)
One Value Proposition targets one Customer Segment.
A high-value, high-cost Value Proposition is offered to paying
customers only.
CHALLENGE Enterprise fails to acquire potential new customers who are
interested in gaining access to a company’s existing customer
base (e.g. game developers who want to reach console users)
The high price dissuades customers.
SOLUTION
(after)
A Value Proposition “giving access” to a company’s existing
Customer Segment is added (e.g. a game console
manufacturer provides software developers with access to its
users)
Several Value Propositions are offered to different Customer
Segments with different Revenue Streams, one of them being
free- of-charge (or very low cost).
RATIONALE An intermediary operating a platform between two or more
Customer Segments adds Revenue Streams to the initial
model.
Non-paying Customer Segments are subsidized by paying
customers in order to attract the maximum number of users.
EXAMPLES Google 
Video game consoles from Nintendo, Sony, Microsoft, Apple
iPod, iTunes, iPhone
Advertising and newspapers; Metro; Flickr; Open Source 
Red Hat; Skype (versus Telco); Gillette

_patterns overview
OPEN BUSINESS MODEL
CONTEXT
(before)
R&D Resources and Key Activities are concentrated in-house:
• Ideas are invented “inside” only 
• Results are exploited “inside” only
CHALLENGE
R&D is costly and/or productivity is falling.
SOLUTION
(after)
Internal R&D Resources and Activities are leveraged by
utilizing outside partners. Internal R&D results are
transformed into a Value Proposition and offered to interested
Customer Segments.
RATIONALE Acquiring R&D from external sources can be less expensive,
resulting in faster time- to-market. Unexploited innovations
have the potential to bring in more revenue when sold
outside.
EXAMPLES Procter & Gamble
GlaxoSmithKline
Innocentive

Design_customer insight
_ideation
_visual thinking
_prototyping
_storytelling
_scenarios

“Businesspeople don’t just
need to understand
designers better; they
need to become
designers.”
Roger Martin, Dean, Rotman School of Management

_customer insight
The challenge is to develop a
sound understanding of
customers on which to base
business model design choices. In
the field of product and service
design, several leading
companies work with social
scientists to achieve this
understanding. At Intel, Nokia,
and Telenor, teams of
anthropologists and sociologists
work to develop new and better
products and services. The same
approach can lead to new or
better business models.

_customer insights the empathy map
1 2 3 4
WHAT DOES SHE
SEE?
describe what the
customer sees in
her environment
• What does it
look like?
• Who surrounds
her?
• Who are her
friends?
• Whatt ypes of
offers is she
exposed to daily
(as opposed to
all market
offers)?
• What problems
does she
encounter?
WHAT DOES SHE
HEAR?
describe how the
environment influ-
ences the
customer
•What do her
friends say? Her
spouse?
• Who really
influences her,
and how?
• Which media
Channels are
influential?
WHAT DOES SHE
REALLY THINK AND
FEEL?
try to sketch out
what goes on in
your customer’s
mind
• What is really
important to her
(which she might
not say publicly)
• Imagine her
emotions. What
moves her?
• What might
keep her up at
night?
• Try describing
her dreams and
aspirations.
WHAT DOES SHE
SAY AND DO?
describe what the
customer sees in
her environment
• What is her
attitude?
• What could she
be telling
others?
• Pay particular
attention to
potential
conflicts
between what a
customer might
say and what she
may truly think
or feel.
WHAT IS THE
CUSTOMER’S PAIN
• What are her
biggest
frustrations?
• What obstacles
stand between
her and what
she wants or
needs to
achieve?
• Which risks
might she fear
taking?
5 6
WHAT DOES THE
CUSTOMER GAIN?
• What does she
truly want or
need to achieve?
• How does she
measure success?
• Think of some
strategies she
might use to
achieve her
goals.

_customer insights the empathy map

_ideation
1. TEAM COMPOSITION
KEY QUESTION: IS OUR TEAM SUFFICIENTLY DIVERSE TO GENERATE
FRESH BUSINESS MODEL IDEAS?
Assembling the right team is essential to generating effective new
business model ideas. Members should be diverse in terms of seniority,
age, experience level, business unit represented, customer knowledge,
and professional expertise.
2. IMMERSION
KEY QUESTION: WHICH ELEMENTS MUST WE STUDY BEFORE
GENERATING A BUSINESS MODEL IDEAS?
Ideally the team should go through an immersion phase. which could
include general research, studying customers or prospects, scrutinizing
new technologies, or assessing existing business models. Immersion could
last several weeks or could be as short as a couple of workshop exercises
(e.g. the Empathy Map).
3. EXPANDING
KEY QUESTIONS: WHAT INNOVATIONS CAN WE IMAGINE FOR EACH
BUSINESS MODEL BUILDING BLOCK?
During this phase the team expands the range of possible solutions,
aiming to generate as many ideas as possible. Each of the nine business
model building blocks can serve as a starting point. The goal of this phase
is quantity, not quality. Enforcing brainstorming rules will keep people
focused on generating ideas rather than on critiquing too early in the
process
4. CRITERIA SELECTION
KEY QUESTION: IWHAT ARE THE MOST IMPORTANT CRITERIA FOR
PRIORITISING OUR BUSINESS MODEL IDEAS?
After expanding the range of possible solutions, the team should define
criteria for reducing the number of ideas to a manageable few. The
criteria will be specific to the context of your business, but could include
things such as estimated implementa- tion time, revenue potential,
possible customer resistance, and impact on competitive advantage.
5. "PROTOTYPING"
KEY QUESTION: WHAT DOES THE COMPLETE BUSINESS MODEL FOR
EACH SHORTLIST IDEA LOOK LIKE?
With criteria defined, the team should be able to reduce the number of
ideas to a prioritized shortlist of three to five potential business model
innovations. Use the Business Model Canvas to sketch out and discuss
each idea as a business model prototype

_ideation brainstorming rules
Successful brainstorming requires following a set of rules.
Enforcing these rules will help you maximize the number of
useful ideas generated.
STAY FOCUSED
Start with a well-honed
statement of the problem at
hand. Ideally, this should be
articulated around a customer
need. Don’t let the discussion
stray too far; always bring it back
to the problem statement.
ENFORCE RULES
Clarify the brainstorming rules
upfront and enforce them. The
most important rules are "defer
judgment," "one conversation at
a time," "go for quantity," "be
visual," and "encourage wild
ideas." Facilitators should
enforce the rules.
THINK VISUALLY
Write ideas down or sketch them
out on a surface everyone can
see. A good way to collect ideas
is to jot them down on Post-itTM
notes and stick these to a wall.
This allows you to move ideas
around and regroup them.
PREPARE
Prepare for brainstorming with
some sort of immersion
experience related to the
problem at hand. This could be a
field trip, discussions with
customers, or any other means of
immersing the team in issues
related to your problem
statement.

_prototyping
“If you freeze an idea too
quickly, you fall in love with it.
If you refine it too quickly, you
become attached to it and it
becomes very hard to keep
exploring, to keep looking for
better. The crudeness of the
early models in particular is
very deliberate.”
Jim Glymph, Gehry Partners

_storytelling why?
INTRODUCING THE NEW
New business model ideas can pop up anywhere in an
organization. Some ideas may be good, some may be
mediocre, and some may be, well, completely useless.
But even outstanding business model ideas can have a
tough time getting past layers of management and
finding their way into an organization’s strategy. So
effectively pitching your business model ideas to
management is crucial. This is where stories can help.
Ultimately, manag- ers are interested in numbers and
facts, but having the right story can win their
attention. A good story is a compelling way to quickly
outline a broad idea before getting caught up in the
details.
PITCHING TO INVESTORS
If you are an entrepreneur, chances are you will pitch
your idea or business model to investors or other
potential shareholders (and you already know that
investors stop listening the instant you tell them how
you will become the next Google). What investors and
other shareholders want to know is: How will you
create value for customers? How will you make money
doing so? That’s the perfect setting for a story. It’s the
ideal way to introduce your venture and business
model before getting into the full business plan.
ENGANGE EMPLOYEES
When an organization transitions from an existing busi-
ness model to a new business model, it must convince
collaborators to follow. People need a crystal clear
understanding of the new model and what it means
for them. 
In short, the organization needs to powerfully engage
its employees. That is where traditional text-based
Power- Point presentations usually fail. Introducing a
new business model through an engaging story-based
presentation (delivered with PowerPoint, drawings, or
other techniques) is far more likely to connect with
listeners. Capturing people’s attention and curiosity
paves the way for in-depth presentations and
discussions of the unfamiliar.
Make the New Tangible
Explaining a new, untested business model is
like explaining a painting with words alone.
But telling a story of how the model creates
value is like applying bright colors to canvas. It
makes things tangible.
Clarification
Telling a story that illustrates how your
business model solves a customer problem is a
clear way to introduce to subsequently explain
your model in detail.
Engage People
People are moved more by stories than by
logic. Ease listeners into the new or unknown
by building the logic of your model into a
compelling narrative.

_scenarios
service
product
single offers multiple offers

Strategy_business model environment
_evaluating business model
_business model perspective on blue ocean strategy

“There’s not a single business
model . . . There are really a
lot of opportunities and a lot
of options and we just have to
discover all of them.”
Tim O’Reilly, CEO, O'Reilly

_business model environment market forces
MARKET ISSUES Identifies key issues driving
and transforming your market
from Customer and Offer
perspectives
What are the crucial issues affecting the
customer landscape? Which shifts are
underway? Where is the market heading?
MARKET SEGMENTS Identifies the major market
segment, describes their
attractiveness, and seeks to
spot news segments
What are the most important Customer
Segments? Where is the biggest growth
potential? Which segments are declining? Which
peripheral segments deserve attention?
NEEDS AND DEMANDS Outlines market needs and
analyzes how well they are
served
What do customers need? Where are the
biggest unsatisfied customer needs? What do
customers really want to get done? Where is
demand increasing? Declining?
SWITICHING COSTS Describes elements related to
customers switching business
to competitors
What binds customers to a company and its
offer? What switching costs prevent customers
from defecting to competitors? Is it easy for
customers to find and purchase similar offers?
How important is brand?
REVENUE ATTRACTIVENESS Identifies elements related to
revenue attractiveness and
pricing power
What are customers really willing to pay for?
Where can the largest margins be achieved?
Can customers easily find and purchase
cheaper products and services?
Main Questions Main AnswersDefinition

_business model environment industry forces
COMPETITORS
(INCUMBENTS)
Identifies incumbent
competitors and their relative
strengths
Who are our competitors? Who are the dominant
players in our particular sector? What are their
competitive advantages or disadvantages? Describe
their main offers. Which Customer Segments are they
focusing on? What is their Cost Structure? How much
influence do they exert on our Customer Segments,
Revenue Streams, and margins?
NEW ENTRANTS
(INSURGENTS)
Identifies new, insurgent
players and determines
whether they compete with a
business model different from
yours
Who are the new entrants in your market? How 
are they different? What competitive advantages or
disadvantages do they have? Which barriers must they
overcome? What are their Value Propositions? Which
Customer Segments are they focused on? What is their
Cost Structure? To what extent do they influence your
Customer Segments, Revenue Streams, and margins?
SUBSTITUTE PRODUCTS AND
SERVICES
Outlines market needs and
analyzes how well they are
served
Which products or services could replace ours? How
much do they cost compared to ours? How easy it is for
customers to switch to these substitutes? What business
model traditions do these substitute products stem
from (e.g. high-speed trains versus airplanes, mobile
phones versus cameras, Skype versus long-distance
telephone companies)?
SUPPLIERS AND OTHER VALUE
CHAIN ACTORS
Describes potential substitutes
for your offers—including
those from other markets and
industries
Who are the key players in your industry value chain? To
what extent does your business model depend on other
players? Are peripheral players emerging? Which are
most profitable?
STAKEHOLDERS Specifies which actors may
influence your organization
and business model
Which stakeholders might influence your business
model? How influential are shareholders? Workers? The
government? Lobbyists?

_business model environment key trends
TECHNOLGY TRENDS Identifies technology trends
that could threaten your
business model—or enable it
to evolve or improve
What are the major technology trends both
inside and outside your market? Which
technologies represent important opportunities
or disruptive threats? Which emerging
technologies are peripheral customers
adopting?
REGULATORY TRENDS Describes regulations and
regulatory trends that
influence your business model
Which regulatory trends influence your market?
What rules may affect your business model?
Which regulations and taxes affect customer
demand?
SOCIETAL AND CULTURAL
TRENDS
Identifies major societal
trends that may influence your
business model
Describe key societal trends. Which shifts in
cultural or societal values affect your business
model? Which trends might influence buyer
behavior?
SOCIOECONOMIC TRENDS Outlines major socioeconomic
trends relevant to your
business model
What are the key demographic trends? How
would you characterize income and wealth
distribution in your market? How high are
disposable incomes? Describe spending patterns
in your market (e.g. housing, health- care,
entertainment, etc.). What portion of the
popula- tion lives in urban areas as opposed to
rural settings?

_business model environment macro-economics forces
GLOBAL MARKET CONDITIONS Outlines current overall
conditions from a
macroeconomic perspective
Is the economy in a boom or bust phase?
Describe general market sentiment. What is
the GDP growth rate? How high is the
unemployment rate?
CAPITAL MARKETS Describes current capital
market conditions as they
relate to your capital needs
What is the state of the capital markets? How
easy is it to obtain funding in your particular
market? Is seed capital, venture capital, public
funding, market capital, or credit readily
available? How costly is it to procure funds?
COMMODITIES AND OTHER
RESOURCES
Highlights current prices and
price trends for resources
required for your business
model
Describe the current status of markets for
commodities and other resources essential to
your business (e.g. oil prices and labor costs).
How easy is it to obtain the resources needed
to execute your business model (e.g. attract
prime talent)? How costly are they? Where are
prices headed
ECONOMIC INFRASTRUCTURE Describes the economic
infrastructure of the market in
which your business operates
What are the key demographic trends? How
would you characterize income and wealth
distribution in your market? How high are
disposable incomes? Describe spending patterns
in your market (e.g. housing, health- care,
entertainment, etc.). What portion of the
popula- tion lives in urban areas as opposed to
rural settings?

_business model environment present vs projected environment

Strategy_business model environment
_evaluating business models

_evaluating business models assessment

Process_mobilize, understanding, design, implement, manage

“Design squiggle embodies the
characteristics of the design
process: Uncertain at the outset, it
is messy and opportunistic, until it
focuses on a single point of clarity
once the design has matured.”
Damien Newman, Central Design

UNCERTAINTY CLARITY / FOCUS
research
& understand
design business
model prototypes
implement business
model design

STARTING POINT FOR BUSINESS MODEL INNOVATION
Satisfy market: Fulfill an unanswered market need(e.g. Tata
car, NetJets, GrameenBank, Lulu.com) 
Bring to market: Bring a new technology, product, or service
to market or exploit existing intellectual property (IP) (e.g.
Xerox 914, Swatch, Nespresso, Red Hat)
Improve market: Improve or disrupt an existing market
(e.g. Dell, EFG Bank, Nintendo Wii, IKEA, Bharti Airtel,
Skype, Zipcar, Ryanair, Amazon.com retail, better place)
Create market: Create an entirely new type of business
(Diners Club, Google)
CHALLENGES
• Finding the right model
• Testing the model before a full-scale launch
• Inducing the market to adopt the new model
• Continuously adapting the model in response to market
feedback
• Managing uncertainty
Reactive: Arising out of a crisis with the existing business
model (e.g. IBM in the 1990s, Nintendo Wii, Rolls Royce jet
engines)
Adaptive: Adjusting, improving, or defending the existing
business model (Nokia “comes with music,” P&G open
innovation, Hilti)
Expansive: Launching a new technology, product, or service
(e.g. Nespresso, Xerox 914 in the 1960s, iPod/iTunes)
Pro-active/explorative: Preparing for the future (e.g.
car2go by Daimler, Amazon Web Services)
CHALLENGES
• Developing an appetite for new models
• Aligning old and new models
• Managing vested interests
• Focusing on the long term
Business Model Design
and Innovation
Factors Specific to
established Organisations

_the 5 phases
OBJECTIVE
Mobilize
Prepare for a successful
business model design
project
Understand
Research and analyse
elements needed for the
effort
Design
Generate and test viable
business model options,
and select the best
Implement
Implement the 
business model prototype
in the field
Adapt
Adapt and modify the
business model in
response to market
reaction
FOCUS Setting the stage Immersion Inquiry Execution Evolution
DESCRIPTION Assemble all the elements for
successful business model
design. Create awareness of
the need for a new business
model, describe the
motivation behind the
project, and establish a
common language to
describe, design, and analyze
and discuss business models.
You and the business model
design team immerse
yourselves in relevant
knowledge: customers,
technology, and environment.
You collect information,
interview experts, study
potential customers, and
identify needs and problems.
Transform the information
and ideas from the previous
phase into business model
prototypes that can be
explored and tested. After an
intensive business model
inquiry, select the most
satisfactory business model
design.
Implement the selected
business model design.
Set up the management
structures to continuously
monitor, evaluate, and adapt
or transform your business
model.
ACTIVITIES Frames project objectives;
test preliminary business
idea; plan; assemble team
Scan environment; study
potential customers;
interview experts; research
what really matters; collect
ideas and opinions
Brainstorming; prototype;
test; select
Communicate and involve;
execute
Scan the environment;
continually asses our business
model; rejuvenate or rethink
our model; along business
models throughout the
enterprise; manage synergies
or conflicts between models
CRITICAL SUCCESS FACTORS Appropriate people,
experience, and knowledge
Deep understanding of
potential target market;
looking beyond the traditional
boundaries defining target
markets
co-create with people across
the organisation; ability to
see beyond status quo; taking
time to explore multiple
business model ideas
Best practice project
management; ability and
willingness to rapidly adapt
the business model; along
“old" and “new" business
models
Long-term perspective; pro-
activeness; governance of
business model
KEY DANGERS Overestimating value of initial
ideas
over-researching and biased
research
watering down or suppressing
bold ideas; falling in love with
ideas too quickly
Weak or fading momentum Becoming a victim of our own
success, failing to adapt

_planning
OBJECTIVE
Mobilize
Prepare for a successful
project
Understand
Research and analyse
elements needed for the
effort
Design
Generate and test viable
business model options,
and select the best
Implement
Implement the 
business model prototype
in the field
Adapt
Adapt and modify the
business model in
response to market
reaction
DATE
WHAT WILL BE COVERING? • Business Model Canvas
• Storytelling
• Business Model Canvas
• Business Model Patterns
• Customer Insights
• Visual Thinking
• Scenarios
• Business Model
Environment
• Evaluating Business
Models
• Business Model Patterns
• Ideation
• Visual Thinking
• Prototyping
• Scenarios
Models
• Business Model
Perspective 
on Blue Ocean Strategy
• Managing Multiple
Business Models
• Visual Thinking
• Storytelling
• Managing Multiple
Business Models
• Visual Thinking
• Scenarios
• Business Model
Environment
Models

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THANK YOU!
THANK
YOU :)

Business Model Generation (Alex Osterwalder)

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